What Does A $4 Trillion Fed Balance Sheet Mean For Gold And Oil

Earlier we explained why Bernanke's actions today mean that the Fed Balance Sheet will likely grow to over $4 trillion by the end of 2013. Critically this flood of liquidity will raise the nominal price of every asset (from whimsical pieces of stockholder paper to barbarous relics and black gold). Some of these assets, like stock prices and high-yield credit spreads do have point-in-time 'value limits' to their price - though at times it seems a dream that fundamentals would ever matter again; but some have less of a binding constraint - such as gold. Should the Fed proceed, as seems likely, and do its worst/best to blow its balance sheet wad then we estimate Gold will be priced at least $2250 per ounce by the end of 2013(of course higher if the Fed sees no evidence of recovery). Meanwhile, deeper underground, the world's mainstay source of energy, WTI Crude oil, could jump to record highs over $150 per barrel(which just happens to coincide with the 'pegged' value of oil in gold). It will be interesting indeed to see how the world's socio-economic infrastructure hangs together should that occur - can't happen? Different this time? Indeed it is now that Ben hit the big red 'panic' button.

Gold vs Fed and ECB balance sheets... notably for QE2, gold priced in all the Fed balance sheet expansion within around half the period (around six months from Jackson Hole) and then overshot - this would infer we see Gold $2250 around the end of the first quarter next year - and expect some overshoot...

Oil vs Fed balance sheet... (which fits nicely into the 0.07 oz of Gold per barrel 'peg' that seems to have been 'agreed' with the world's oil producers).

Everyone needs to understand as to the REAL REASON why QE3 was launched last night....APPLE!!!!

Bernanke's focus was on Market/Public sentiment...yeah?

Think about it. If this week's launch of the iPhone5 were to fail and not meet and/or exceed sales targets, THAT ladies and gentlemen, would potentially be the rudest awakening to the Western World, that we really are in a Global Recession, bigger than anything else! Food & Oil can go up in price, but don't fuck with our toys.

Apple's revenue contributes to what percentage of the US GDP figures, and how much of Apple's revenues are attributable to iPhone sales??? (Rhetorical, I know the stats).

iPhone sales affect both GDP numbers and sentiment.

iPhone (Apple) has a greater effect on Market/Public sentiment than any other factor.

After FaceBook went FacePlant and then FaceEgg, there was no way in hell Apple was going to be allowed to go the way of the Lawn Dart.

I pledge allegiance to the fruit Of the United States of America.And to the iPhones for which it stands.One pie, under Obama , fundamentally transformed,With slices, of wealth to spread around, for all.

i think a more disturbing comment from big ben was that new home sales help the economy....and i will finish his thought...so congress you guys must reward people that buy new and punish those that want to buy existing....

You know that the anti-christ is strictly a Christian construct, right? You also know that the translation to which I believe you're referring has no grounds in the reality of ancient Hebrew or Greek right?

I have no love for the man as a leader but let it go man. You're just making yourself look stupid when you say shit like this.

I'm confused. Ben prints to infinity until unemployment goes down...inflation will no doubt rise...wages won't....people will have less money to spend with prices rising...companies will do worse....they won't hire and will probably let workers go...Ben prints to infinity until unemployment goes down. Sorry folks....It's (still) all Bullshit!

And I think the only way I can take advantage of QE is to refinance my house. that sure as hell wont make up for higher gas and food prices. thank goodness core inflation is steady otherwise I would feel the dollar devaluing. Sarcasm ON! Meanwhile my buddy who is a money manager will be taken to the Ryder Cup and schmoozed.

"Although a policy of intervening to affect the exchange value of the dollar is nowhere on the horizon today, it's worth noting that there have been times when exchange rate policy has been an effective weapon against deflation. A striking example from U.S. history is Franklin Roosevelt's 40 percent devaluation of the dollar against gold in 1933-34, enforced by a program of gold purchases and domestic money creation. The devaluation and the rapid increase in money supply it permitted ended the U.S. deflation remarkably quickly."

I personally dont believe the banks are here to be my daddy and give me a nice return on my deposits. I have the option of keeping it under my mattress along with the risk. There are better ways to invest. The lazy way is no longer profitable..lets get over it already.

Never ever forget that oil scarcity took the price to $150 in 2008, before Quantitative Ease was even in the lexicon. There was zero printing that summer. But there was scarcity as China ramped consumption for the Olympics and global supply could not match it.

There are almost 1/2 a billion more people now and the rate at which oil is coming out of the ground globally has not risen hardly at all.

The point being, if we go to $150, a lousy $40 billion per month is going to explain a rather small part of that. The big part is the relentless scarcity that drives drilling into deep ocean burning up effort and joules to get less and less out vs convenient on shore conventional drilling that requires nearly no effort.

Baloney, there were housing bubbles all over the freaking world. Credit was expanding like crazy. What is credit? Money with counterparty risk. With all that hot money, oil was bid up to $150 where it pricked the housing bubble because it sucked more money out of the people living hand to mouth on sub-prime loans and led to the collapse.